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WIKI ANALYSIS
SAIC (NYSE: SAI) is a provider of scientific and technological products, solutions, and consultation to the U.S. Government in the areas of defense and intelligence.[1] Despite its focus on U.S. government contracting, SAIC also receives revenue from two other segments: Commercial as well as Corporate and Other.[2] Much like other companies that primarily compete for security-oriented government contracts, SAIC operates in a business environment defined by two opposing trends and forces. First, defense and intelligence contracting is always in high demand - the U.S. government spends nearly a trillion dollars a year on defense spending. Conversely, government expenditures may decrease in the face of continuing economic concerns and cutting bloated defense contracts may be appealing to lawmakers.
Business Growth
SAIC has posted consistent growth in revenue over the last five years: revenue grew from $10.0 billion in 2009 to $10.8 billion in 2010.[1] Driving these gains were increases in contract opportunities as well as two acquisitions, CloudShield Technologies, Inc and R.W. Beck Group, Inc.[1]
Trends and Forces
Defense and Intelligence Contracting Enjoys Historically High Demand
In the aftermath of the September 11, 2001 terrorist attacks, the U.S. defense and intelligence services grew dramatically. As of 2010, the U.S. defense budget nears one trillion dollars, nearly doubling its decade-ago figures. As such, SAIC enjoys the reliability of government spending on defense issues and counterterrorism efforts.[3]
Revenue Contingent on Continued U.S. Government Spending
Almost all of SAIC's revenue come from contracts with the U.S. government, especially in defense and intelligence. As U.S. economic concerns continue, lawmakers may be inclined to cut into the near trillion dollar U.S. defense budget. Such cuts would have second and third order effects in the private consulting industry, especially on companies such as SAIC that are reliant upon contracts for their revenues.
Competition
SAIC competes in a largely saturated, private industry that provides consultation services for the U.S. government. SAIC's main competitors include Booz Allen Hamilton (BAH), SAIC (SAI), Lockheed Martin (LMT), ManTech International (MANT), and Raytheon Company (RTN).
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